Cardiff Airport has the potential to grow passengers to three million

Business Editor Sion Barry looks at how a new era of co-operation could help revive the fortunes of Cardiff Airport

Ealier this year First Minister Carwyn Jones described Cardiff Airport as an embarrassment and called on its Spanish owners to invest or sell.

However, fast-forward six months and a seemingly more constructive and formal relationship has been struck up between the airport and the Welsh Government.

No doubt Abertis would be prepared to sell the airport at what it considered fair value for its shareholders – as well as potentially enter a new ownership model where it maintained control of the asset but with the airport run by another company under a concessionary agreement. However, it looks like, in the short-term anyway, the status quo will be maintained.

Perhaps there has finally been a realisation that for any regional airport in the UK to prosper it needs more than just investment from owners – but the wider backing too of stakeholders in the public and private sectors.

At the heart of this more constructive relationship is the Cardiff Airport Taskforce Group, which is chaired by the First Minister himself.

A masterplan is evolving, but what would really focus the minds would be a nice juicy passenger target to which all support strategies would be designed towards achieving.

Despite a slowdown in passenger growth due to the recession, passenger numbers at regional airports in the UK are still forecast to grow

While Cardiff is close to dipping below one million passengers following the loss of low cost carrier Bmibaby – an initial target of three million passengers by 2020 is realistic. The current terminal could accommodate that number without any significant new investment.

The First Minister had stated his desire to see Air Passenger Duty (APD) devolved to Wales – for the sole purpose of reducing or even abolishing the tax as means of enticing more airlines and routes to Cardiff.

Bristol Airport in its submission to the Silk Commission, has questioned the validity of a devolving of APD to Wales, claiming it would breach state aid rules – although Cardiff is close to going below the threshold of one million passengers where state aids rules in aviation don’t apply.

It added: “A lower APD rate in Wales would distort the market and could cause severe damage to the detriment of the south west of England passengers and the economy.”

Cardiff Airport, in its submission is understandably supportive and rejects the argument that it would be anti-competitive.

However, the reality is that for all the concerns raised by Bristol if devolved it would have to just live with it – and continue to lobby the UK Government to reduce or abolish the tax at airports in England.

An analysis of changes in APD regimes in Holland and Germany – and the resulting impact of cross border passenger flows – has indicated that potentially a lower or abolished APD regime in Wales could add 300,000 in the first year at Cardiff Airport – although there would be a lag as airlines make decisions often a year in advance on routes.

However, a potential devolving of APD is very much part of the current “sales pitch” from Cardiff Airport, although airlines would want to see confirmation before looking to exploit the benefits by investing in Cardiff.

Bristol has done an effective job in growing its passenger number from Wales in recent years. Last year around 17% or 738,000 of Bristol’s total passengers of more than five million (5.7m), originated from Wales. The passenger gap between the two airports is now more than four million in favour of Bristol.

The Silk Commission is currently assessing whether Wales should have tax-varying and raising-powers – of which APD is just one of number of taxes being explored. Currently passengers originating from Wales pay around £100m in APD. Passengers using Cardiff Airport (although not all are from Wales) pay around £8m a year.

While the Welsh Government will await the findings of the Silk Commission, it could now seek to negotiate a devolving of APD – even if it means the current revenue generated from the tax at Cardiff is taken off its block grant from the Treasury. There is a precedent in that APD in Northern Ireland was recently harmonised with that of the Irish Republic. However, at just £8m, it would not be a huge blow to the Welsh Government’s budget.

Cardiff Airport is continuing to talk to the regular low-cost carrier suspects such as Ryanair and easyJet.

However, in terms of its current geographical presence there is a strong case for low-cost airline Jet2.com to operate out of Cardiff.

The airline currently has bases in Northern Ireland, Scotland and the north of England. It has not ventured further south than East Midlands Airport.

However, the socioeconomic make-up of its “northern” passenger base is very similar to that of South Wales. It also sells tickets via travel agencies – a method still popular with many Welsh passengers. Due to its current footprint a base in Cardiff would respect a new market and not be in competition to its existing operations.

If it provided the same number of routes as it currently does at other UK regional airports, it would more than make up for the loss of passenger numbers (200,000 a year, although it was once as high as 700,000) at Cardiff as the result of the decision of BMIbaby to pull out last year.

The Welsh Government and the airport are also thinking strategically over inbound charter services – as a means of enticing more high spending European tourists into Wales.

Austrian tour operators Prime Reisen will charter four planes next summer to Cardiff.

While small in scale this has the scope to grow significantly as has been the case of other Austrian charter services into Scotland and Jersey.

German airline Lufthansa will start a scheduled service once a week from Dusseldorf next summer into Cardiff – for which the majority of seats will be booked by tourist operators.

This again has the potential to be scaled up to bring thousands of high spending German tourists into Wales each year. It is also hoped that the Helvetic route from Zurich to Cardiff can be reintroduced next summer.

In terms of connecting in hub airports, which Cardiff has via KLM to Amsterdam and to a lesser degree Flybe into Charles du Gaulle in Paris – this has to be aligned to the key markets for the Welsh economy.

Again this will need Welsh Government route development support via indirect financial backing to airlines like in marketing and training.

A goal has to be a scheduled service, via an airline such as Emirates, into a Middle East hub – providing connections into key markets in China, south-east Asia and Australasia.

The masterplan would also need to focus on improved access to Cardiff Airport.

The bus service from Cardiff could be made more frequent.

The next all Wales rail franchise, currently held by Arriva, should have a condition of provision of more services from Cardiff to Rhoose station.

The UK Government’s decision to fund electrification of the Vale of Glamorgan Line provides an opportunity to look at a funding model for a rail spur into a new station at the airport itself from the Vale of Glamorgan Line.

The Welsh Government should also lobby for services, as part of the next franchise on the Great Western Main Line, to the station. This could longer-term open up the possibility of a service from as far east as Reading.

While it has to be seen as a long-term turnaround, there is no reason why Cardiff Airport, cannot reach three million passengers a year by 2020 – with a target by 2025 of overtaking Bristol – as a result of a focused public-private partnership approach and investment in transport infrastructure significantly widening Cardiff’s passenger catchment area.

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